When you’ve built a successful accounting business, it’s only natural that you want it to continue growing and prospering even after you retire. Choosing and grooming a successor to replace you takes time and planning, so it’s best to begin the process well before you’re ready to step aside as the head of your accounting firm.
Creating a Good Succession Plan
There are several factors to consider when crafting a succession plan, including legal and financial issues. If you own your accounting practice as a sole proprietor, and plan to sell it when you retire, you need to find a buyer. The buyer of your accounting business may or may not be the same person you select to succeed you as the operational head of the firm.
If your company is structured as a partnership or has equity shareholders, then a buyout arrangement between yourself and the remaining partners or shareholders needs to made and properly drafted by an attorney. Buyouts usually require getting the value of the company appraised so you can accurately determine share values.
Don’t forget to consider your retirement planning and tax situation when setting buyout terms. For example, you may prefer to receive payments over time instead of as a lump sum payment, to reduce your tax liability.
Picking the Perfect Successor
Picking the right person as your successor can make all the difference in having a smooth transition and providing continuity for your firm’s clients. A good candidate to replace you is someone who shares your vision for the company and has the necessary skills and knowledge to continue moving your business forward.
Your successor doesn’t have to be a relative or current company executive. If you think someone from outside your company is the best person for the job, bring them on board in plenty of time for them to become familiar with your business.
The Succession Process
There’s no set time frame for implementing a succession plan, but even five years away from your planned retirement may not be too soon to start the wheels in motion. A lot depends on the person you select as your successor. Some people may be ready to jump into the role quickly, while others may need time to acquire some additional skills or education.
You can help make the transition smoother by working closely with your successor in the days and months leading up to the official transfer of authority. Working alongside them, as a mentor, you can help them become familiar with all the executive management tasks the head of the firm handles. Also, provide support for your company’s new head making sure that the remaining management team complements the talents of your successor and has confidence in their leadership.
Provide a Smooth Transition for Your Clients
In addition to providing a smooth transition for your business and your employees, also make efforts to provide important clients with a feeling of seamless continuity. Take the time and make the effort to introduce your successor to major clients. Reassure them that your firm will continue to provide the level of accounting services that they are used to receiving. This is important because if the change in leadership is not handled properly, it can have a negative effect on client relationships and lead to a decline in business.
Carefully crafting and implementing a succession plan can help preserve the legacy of your accounting business. It can also ensure continuity for your firm’s clients, while offering financial security for family members and individuals with a stake in your business.